You might not be rich, but there’s a good chance you can still buy a house. And since real estate prices don’t appear to be falling anytime soon, the best time to buy is now. When money is tight, you’ll have to get creative, and these hacks can help.
Get pre-approved, not pre-qualified.
While there might not seem like a huge difference between the two, sellers often want to see a pre-approval, which means the buyer (you) has taken the time to have their credit checked and went a step further with their lender to ensure they have cash at the ready. Zillow discusses the differences and asserts that you should clarify which you seek, since the terms are often interchangeable. Having a pre-approval in hand may give you more leverage for a smaller offer.
Look for grants.
California doles out more than $460 million in Housing and Community Development funds each year. These grants and loans are in place to help rehabilitate substandard homes and to ensure that each community throughout the state continues to thrive. If you’re a first-time homebuyer, there are also other programs that can help you get the money you need to make your move. Nerdwallet explains that there are special programs for school teachers and those willing to make energy-efficient improvements.
Research the average down payment.
Instead of simply looking up the type of home and the number of bedrooms you want, spend some time researching how homes sell in your target locale. Buyers in the Woodland Hills area start off with an average down payment of 21 percent, and homes sell for .7 percent more than the list price in most cases. Further north, San Diego area homes typically sell for lower than the asking price, but buyers often have to put down a higher percentage.
Understand the true costs.
If you think the cost of homeownership stops at the mortgage, you’re wrong. Consider the property tax rate of the county and the condition of the home. You may be better off buying a slightly more expensive property that won’t require extensive repairs or ongoing maintenance. For example, a $10,000 difference in price may result in a payment that’s higher by $55/month. Over the course of 10 years, that’s $6,600. If you bought a home that needed a new HVAC system and electrical work, you would be out of pocket more than twice that amount, and all at once. Kiplinger says you have to factor in insurance and utilities, too.
Make the right offer.
Before making a huge financial mistake, check the comparable recent sales on similar homes in the area. If most homes are going for $450/sq. ft., don’t be afraid to make a similar offer on a house listed for $455/sq. ft. That $5 difference could shave $13,000 off the price of an average-sized home.
Know if buying is right for you.
Buying a home is a smart choice for most people, but not everyone. If you don’t plan to stay in the same location for more than five years, consider renting until you’re ready to commit for the long term. Moving before the five-year mark can cost you cash in the form of capital gains taxes. Plus, five years gives your home the time to appreciate to the point of being able to turn a profit – or at least break even – since you’ve already spent out of pocket on closing costs, insurance, and maintenance for that timeframe.
It’s easy to get swept up in the excitement of searching for your dream home. But when cash is an issue, you’ll need to step back for a moment and form your financial plan of attack.
Suzie Wilson is an interior designer with more than 20 years experience. What started as a hobby (and often, a favor to friends) turned into a passion for creating soothing spaces in homes of every size and style. While her goal always includes making homes look beautiful, her true focus is on fashioning them into serene, stress-free environments that inspire tranquility in all who enter. The Ultimate Guide to Prepping Your Home for an Open House is filled with tips, tricks and other advice based on Suzie’s years of experience in interior home design that will set you up for success.
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